Even though I love credit cards because of their many benefits, I understand they are not for everyone.
My sister struggles with credit cards, and now mainly just uses cash so that she doesn’t get into credit card debt. Luckily, this has not led to credit card debt for her but I believe that is because she caught her mistakes early on.
However, others are not as lucky.
Others rack up large amounts of credit card debt. According to NerdWallet, the average household in the United States (who has debt) has an average credit card debt of $15,611. That is an increase of 2.26% from the amount of average credit card debt in a household in the same period in 2013.
Also, according to National Foundation for Credit Counseling, around 35 million people in the U.S. roll over $2,500 or more in credit card debt each month. That means these people are NOT paying their debt off each month in order to avoid interest. Instead, they are racking up credit card debt and interest charges.
There are many credit card mistakes that people may be making, which then leads to them incurring debt.
Below are different credit card mistakes that can lead to credit card debt. Read below so that you can learn about the possible mistakes you may be making.
1. Ignoring the terms of a credit card is a credit card mistake.
Before you sign up for a credit card, you should understand all of the common terms. Sadly, many people do not fully understand credit card terms and that’s a leading cause for why people fall into credit card debt.
You should do your research and understand:
- What an interest rate is;
- What a minimum payment is;
- What happens when you only pay the minimum payment;
- How your credit card use impacts your credit score;
- If you have a 0% interest rate, how you might actually lose the 0% and have to pay the “real” interest rate;
- And more!
2. Buying items when you don’t have the cash to afford it.
Too many people treat credit cards like free money, which it is not. You should always make sure that you have the money in cash or in your personal bank account to afford something.
That jacket, dress, video game, and so on are just not worth the debt that it may accrue. A simple $50 dress may balloon into hundreds of dollars of credit card debt because of interest fees.
3. Forgetting to pay your credit card bill.
Another credit card mistake is forgetting to pay your credit card bill. Even if you have the money to pay your credit card balance in full each month, it does no good if you never actually remember to pay your bill each month.
Paying your credit card bill late can lead to many problems. It may lead you to having to pay a late payment fee, and it also might show up on your credit report and impact your credit score.
4. Paying only the minimum payment each month is one of the common credit card mistakes.
This is another credit card mistake that many people make each month. Some make this mistake because they don’t have the funds to pay their full credit card balance each month.
Others only pay the minimum because they believe that’s all they need to pay in order to avoid interest charges. YES! Many people actually think this, and this is why #1 in this post is so important. Everyone needs to fully understand what “minimum payment” means and what happens if that is all that you pay.
You should always try to pay more than the minimum. If you do not, you will have to pay interest charges which may inflate your credit card debt significantly each month.
PAYING ONLY THE MINIMUM IS NOT ENOUGH PEOPLE!
5. Spending money you normally wouldn’t spend in order to rack up credit card rewards points.
Credit card reward points are great, but if you spend money that you do not have just so that you can earn “free” vacations, gifts, and more, nothing is actually free.
Some will spend more money than they have so they can reach the minimum spending in order to earn rewards points.
This then can spiral out of control if you do not keep track of how much money you are spending.
Do you have credit card debt? Have you ever been guilty of making any of these credit card mistakes?
If you do not know your credit score or are interested in learning more, please check out my article How Your Credit Score Affects Your Life + Credit Sesame Review. In it, I also include a link to Credit Sesame so that you can check your credit score safely for free.